The Right Kind of Lighting Can Save You Money in Energy Costs—and Taxes

By Craig DiLouie, Lighting Controls Assn. November 1, 2005

On August 8, President Bush signed the Energy Policy Act of 2005 (EPAct 2005). Estimated to cost the federal government about $14.5 billion over 10 years, EPAct 2005 is the biggest overhaul of national energy policy since 1992.

One of the act’s provisions includes a tax deduction of up to $1.80 per sq. ft. for building owners to encourage investment in energy-efficient building systems, including HVAC/hot water, building envelopes and interior lighting. This provision is anticipated to stimulate widespread investment.

Specifically, EPAct 2005’s Energy Efficient Commercial Buildings Deduction provides one of three possible tax deductions. Building owners can earn a deduction of up to $1.80 per sq. ft. for targeted building systems; a $0.30—$0.60 per sq. ft. deduction for interior lighting systems; and a partial deduction of up to $0.60 per sq. ft. for implementation of any of the three systems noted above. Note these are interim rates until partial deduction rules are established by the Secretary of the Treasury.

The Interim Rules for Lighting Systems define the lighting system energy-savings target to be a lighting power density that is 25% to 40% lower than the minimum requirements in Table (building area method) or Table (space-by-space method). These do not include any additional interior lighting power allowances that may be achieved using ASHRAE Standard 90.1-2001. For warehouses, the lighting power density must be 50% lower than the minimum requirements of ASHRAE 90.1-2001 to receive a $0.60 per sq. ft. deduction.

Besides demonstrating a reduction in power density from 90.1, all controls provisions in the standard must be met, bi-level switching must be installed for most buildings, and the application must meet the minimum requirements for calculated light levels as set forth in the 9th edition of the IESNA Lighting Handbook.

A 0.78-watts-per-sq.-ft. power density is achievable in offices with commonly available products including high lumen F32T8 lamps, extra-efficient ballasts and high-performance fixtures, such as suspended indirect fixtures.

The effective window of this law is Jan. 1, 2006 through Dec. 31, 2007 (inclusive).

Big savings

NEMA estimates that the energy capacity savings for lighting alone is about 312 MW of electricity for the two-year provision, which will result in a reduction of about 10 million metric tons of carbon emissions. NEMA further estimates that the provision will generate about $500 million in additional sales of lighting systems and products alone.

“The provision offers opportunities to design, install, service and maintain energy-efficient lighting, HVAC and building envelope systems,” says Kyle Pitsor, Vice President of Government Relations for NEMA. “In addition, the building owner may be able to take credit in complying with the provision using daylighting, improved fan efficiency, multiple- or variable-speed compressors, on-site generation, and wiring with lower energy losses.”

Click here to access Craig DiLouie’s complete white paper on EPAct 2005’s Energy Efficient Commercial Buildings Deduction.

EPAct 2005 Lighting Benefits

  • Tax deduction of up to $1.80/sq. ft.

  • Estimated $500 million increase in lighting product sales

  • Estimated lighting system savings of 312 MW